Dutch Central Bank Believes That Blockchain Is Inefficient “For the Time Being”

The Dutch Central Bank, De Nederlandsche Bank (DNB), have published a report today, June 7th, stating that they have concluded that blockchain is not an efficient addition to payment systems in the financial market – yet.

Part of the report reads [translated from Dutch]:

DNB concludes that for the time being blockchain technology can not meet the very high demands of a financial market infrastructure. This is evident from DNB’s own experiments with this technology. The biggest shortcomings are inadequate capacity, inefficiency due to high energy consumption and lack of complete certainty about having paid a payment.

The DNB have spent three years experimenting with Distributed Ledger Technology, evaluating four prototypes under the moniker “Dukaton”. Their evaluation took in various consensus algorithms as well as mechanisms for validation. However, their findings were that “the current payment systems are very efficient, can handle large volumes and provide the legal certainty of payment. The blockchain solutions tested show that they are not sufficiently efficient, with regards to costs and energy consumption, and they can not handle large numbers of transactions.”

Not All Bad News

There were positives in the report though, namely that blockchain could help out when it comes to the robustness of security, particularly against external attacks, although this would likely come at a price – that of “capacity and efficiency”.

However, DNB obviously feel that there is hope for the future with the technology. The report concludes:

DNB finds the technology behind Bitcoin, the blockchain, interesting and promising. Perhaps new algorithms will meet all the requirements for FMIs in the future. That is why DNB continues to invest in knowledge of this technology and is experimenting with it. DNB also conducts discussions with new and existing parties in the market about possible applications, in order to contribute to innovation from its role.